Wolf on Wall Street

Wednesday, October 6, 2010

EOD POST

OK, I'm headed back home where my internet should be back working in a few hours. As for today's close, in my opinion, considering the breakout and the intensity of the breakout yesterday, the fact there was no follow through today is not good for the bulls. Any manor breakout should always see follow through buying the next day, from the close I don't think you can say we say follow through today.

The Dow closed up .23%
The S&P-500 closed down -.06%
The NASDAQ 100 closed down -.89%

Here's what the end of day 3C charts looked like:

The DIA 1 min chart showing a pretty consistent larger 1 min negative divergence

The Q's showing 2 larger (white ) positive divergences, although the smaller red arrow divergence can be seen working effectively as well. Again, end of day there's a consistent negative divergence.

As I mentioned earlier, the SPY got taken down (3C) quite far yesterday, so all of today's action occurred in a negative 3C posture. The negative divergence at the end of the day is not as bold as the others.

Taking a look at the 5 min chart, you can see just how much damage was done yesterday. Apparntly there was a lot of distribution into higher prices.

Although scaling is not perfect, you can seeAAPL had a lot of influence on the market in the early going.

Later SMH-the semi-conductors took over. AAPL simply did not make the higher highs into the close that SMH did. We have seen this pattern of using one or the other for a few weeks now to juice the market.

This is the 1 min FAZ chart. The first arrow at the bottom shows the first pocket of accumulation. The green arrow shows price staying locked in a range, but 3C moves higher, again this is accumulation.

To get a better view of the trend without the gyrations of market makers/specialists, the 15 min chart is presented above. The first white arrow is where 3C closed yesterday. The second, where it closed today. Prices were up slightly today with the XLF flat, but the scale of the divergence in quite impressive.

Here is UUP's 15 minute chart. There's an apparent bullish descending wedge and a trend up in 3C. This loks like a very miniature version of the October -December 2009 reversal in te dollar, which was quite a bit bigger.

This is XLF's 1 min with what I believe to be a slight positive divergence at the end of day, we may see early strength in financials tomorrow. It is a difficult divergence to make out though when compared to prices.

The 15 minute chart shows the distribution as of yesterday's close and today's close so the trend has continued, again in the white box, is what I believe to be a small positive divergence.

I'll update more when I get my internet up and running at home, until then I twiddle my thumbs by a candle light. It's amazing how much we rely on the internet.

NASDAQ follow the leader?

Today the NASDAQ has nearly erased all of yesterday's intraday gain (less the gap).

AAPL is still the Patron Saint

Want to move the market, just buy 1 stock.

I wish I could afford the $10,000 a year subscription to NASDAQ to see the NASDAQ 100's actual weighting. I understand AAPL accounts for nearly 20% of the NASDAQ 100.

Update

The DIA looks like the last little positive divergence is now negative and heading toward a leading negative divergence.

This is what I meant on Monday night's post, "I don't see the natural progression of bullish to bearish being taken out" when I was talking about the bounce and why I wasn't to worried about it. There's a trend intact, one day does not make a trend.

There is something off with this market today, it's behavior has deviated substantially from a normal POMO day, I haven't quite figured it out, but I'll keep looking and I don't see it as anything other then god news for shorts.

Movement in the Dollar?

Shooting atar o the Euro hourly

Spike in the USD vs JPY

Do I SPIE A DESCENDING WEDGE IN THE DOLLAR?

SPY by Request

SPY

SPY just tok out a major support zone around $115.90. This is multi-day support.

AAPL

Is about ready to take out this morning's last ditch support. Look for heavy volume.

By Request GLD in multiple time frames

3C Quick Start

Many of the charts you see here at WOWS are my proprietary indicator 3C which reveals underlying institutional money movements and often contradicts price. To understand the annotations made on charts, you must first understand that 3C has no numerical value, it is a pure divergence indicator. Positive divergences represent accumulation by smart money, negative divergences represent distribution by smart money and when 3C trades with price, that is trend confirmation.

The chart annotation system is simple; white arrows represent relative positive divergences, red arrows represent relative negative divergences and green arrows represent trend confirmation. When 3C is in a white or red box, that represents a leading positive or negative divergence, leading divergences are the most powerful.

We analyse 3C in multiple timeframes, the longer the timeframe the stronger the accumulation. 1-2 min timeframes represent intraday moves, a 5 min timeframe can represent a day or two and 15 min timeframes average trends of a swing trade nature. 30 and 60 min charts can move the market for a month or more and daily charts can be over a year.

You'll get use to seeing the charts and understanding how the multiple timeframe analysis works and works well.

Welcome to Wolf on Wall Street.

The trades featured here are meant to maximize returns with the least risk and highest probabilities. Unless otherwise mentioned, all trades are meant to be executed at market. I prefer long-term trending trades which perform well in rising markets, but really stand out in declining markets. However, we get occasional one day gifts 30,40,60% 1-day gains. I'd urge you to consider taking some or all off the table in such cases, the markets don't give gifts like that often or for very long. Most of the returns that make the system outperform so well come in short-entry trades. If you are opposed to short trades, this is not the system for you, unless you are ok with buying an inverse ETF. If you would like more information about the truth about shorting stocks, just email me.

Risk management. I recommend a specific and consistent risk management approach to all positions. In most cases we try for 2% risk money (2% of portfolio) unless such a position size exceeds 15-20% of overall portfolio in actual position size. Each trader is different and each has a different allowance of open trades. I like to keep the overall money in the trade around 10-15% of portfolio per position in case of gaps against you. Stops are generally executed at the end of day and I personally never place a stop order, all my stops are mental; remember, the middle man gets to see everyone's cards. When you are not in tune with the market or opportunities just aren't that spectacular, I take my risk per position down to 1% or even half a percent of portfolio value.

Each trader is different and must determine their own level of comfort with risk. I do have a channel stop which I provide to TeleChart/StockFinder users for automated stops, I appreciate you using my links to sign up if you do. The Trend Channel catches trends and works well as it automatically adjusts for each stock's volatility. Arbitrary exits based on nervousness about the markets WILL decrease the portfolio performance dramatically. This system will not ever get you in at market bottoms or tops. The recent 1 year performance against the Russell 2k buy and hold had the system beating it by 3:1. Ultimately it is up to you as to how you proceed, but I'm always available to help you determine what might work best for you.

I do use other scans and systems when market conditions warrant their use and may change strategy with market conditions.

The MOST IMPORTANT tool you have to bring you long term success is RISK MANAGEMENT. There are plenty of articles linked at Trade-Guild.net on Risk Management. We can be wrong 75% of the time and still outperform the market with solid, consistent risk management.

Position Sizing

The position sizes noted in the positions @ 2% risk of portfolio are based on a $20,000 portfolio-adjust as needed. Due to tight stops, there is the possibility, even probability that one position could take up the entire portfolio. You need to decide how many positions you want to trade and reduce the position size according to that. For instance, if you want to trade 5 positions in a $20,000 portfolio, no one position should be valued at more than $4,000-not risk money or 2% rule, but share price entry x shares.